As signs in Washington point to a possible deal on raising the national debt ceiling, Wall Street thinks any euphoria of such a deal may have already happened or will be short-lived over the holidays. next week, shortened by four trading days. . Likewise, once the immediate euphoria surrounding Nvidia’s Q2 forecast and enthusiasm for all things AI wears off, attention will turn to next Friday’s reading on the mass nonfarm payrolls for the month of May (the estimate compiled by Dow Jones sees 188,000 new jobs), the upcoming Federal Reserve policy meeting on June 13-14, and the nagging fact that so many stocks are failing to throw. The latest fear in the trading rooms is that the economy has been so resilient lately, with inflation only slowly falling, that the Fed could raise rates by a quarter point, if not during the June meeting, then at the following one on July 25 and 26. . The Atlanta Fed’s GDPNow model estimate for second-quarter real gross domestic product growth most recently stood at 1.9%, while the CME FedWatch tool Friday night showed nearly 67% chance the Fed will hike another quarter point in June and raise the Fed funds rate to 5.25% to 5.50%. There’s even a 25% chance the rate will be 5.50% to 5.75% by the end of the July meeting, according to the CME. Some of this movement could be tied to sentiment related to the debt ceiling talks. To top it all off, June is usually a lousy month for stocks anyway, no matter the machinations in Washington or the Fed tea leaf divination. “The reason June is generally a weak market is because we’re in Q1 earnings season, which means companies are relatively quiet, which leaves investors dependent primarily on policy news, which is generally a risk to the market,” said Jay Hatfield, CEO of Infrastructure Capital Management. “The overhangs on the market this year [are] the debt ceiling negotiation, hawkish comments from the Fed and a banking crisis. It looks like we’re going to get a deal on the debt ceiling over the weekend, which should help the market stabilize.” The problem for many on the street is that the S& P 500 Tech (up more than 5% this week), the Nasdaq Composite (up about 2.5%) and the S&P 500 (with a gain of 0.3%) mask so much weakness below the surface The S&P 500 Consumer Staples, Materials, Health Care and Utilities were all down between 2.4% and 3.2% this week, and the Dow Industrials was down 1%. up 9.5% so far in 2023, only a small number of stocks are doing well.” The number of stocks trading above their 200-day moving average has fallen since mid-April “, wrote Liz Young, head of investment strategy at SoFi, in a blog post on Thursday. “Despite the market’s rise over the past month and change, the strength below the surface has actually deteriorated.” All of this comes at a time of year characterized by seasonal variations for stocks, whatever. “Historic achievement [in June] has been lukewarm for [the] DJIA and S&P 500,” Christopher Mistal of the Stock Trader’s Almanac wrote this week, though he noted that performance in years like this, before presidential election years, tended to be stronger. Yet June is historically only ranked the 11th strongest month of the year for the Dow Industrials, the ninth strongest for the S&P 500 and Russell 1000, and the 7th strongest for the Russell 2000.” The ‘summer rally’ for most years is the weakest rally in four seasons,” the almanac says. Unfortunately, the market backdrop “remains cautious and still braces for further sideways action and a pullback. or a probable correction during the weak summer months, especially after mid-July in the two worst months of the year – August and September,” the almanac editor Jeffrey Hirsch wrote Thursday. Calendar for the week ahead Tuesday 9:00 a.m.: S&P/Case-Shiller Home Price Index (March) 10:00 a.m.: Consumer Confidence (May) Earnings: HP Inc., Hewlett Packard Enterprise Wednesday 8:45 a.m.: Keynote speech Fed Governor Michelle Bowman 9:45 a.m.: Chicago PMI (May) 10:00 a.m.: JOLTS (April) 1:30 p.m.: Speech by Fed Governor Philip Jefferson 1:30 p.m.: Philadelphia Fed President Patrick Harker speaks Earnings: Advanced Auto Parts, Salesforce, NetApp, Raymond James, Donaldson, Capri Holdings, Nordstrom, PVH Corp., Crowdstrike, Okta Thursday 8:15 a.m.: ADP Private Payroll Report (May) 8:30 a.m.: Initial Claims (week ended May 27) 9:45 a.m.: S&P Global Manufacturing PMI (May) 10 a.m.: ISM Manufacturing (May) 1 p.m.: Fed Harker Talks Earnings: Dollar General, Broadcom, Cooper Cos., Paychex, Macy’s, Five Ci- Below, C3.ai, Lululemon, Zumiez Friday 8:30 a.m.: US Jobs Report (May) – CNBC’s Samantha Subin, Fred Imbert and Michael Bloom contributed to this report.
